Why Board Recruitment Practices Must Change

Nicholas J. Price
6 min read
Board recruitment practices have kept pace with longstanding business practices, but the marketplace has been changing rapidly and board recruitment practices just haven’t evolved at the same pace. In essence, board recruitment practices are quickly becoming outdated. A board’s composition is one of the most viable assets a company has. The wide variety of perspectives that board members bring to the table adds value through collective opinions. Boards develop a sound consensus from robust discussions that result from deep questioning and the strong expertise of one or more board directors. Collective knowledge is invaluable in the areas of strategy and risk. It’s time that board recruitment practices got up to speed with modern governance. Today’s board directors need much different expertise than board directors of the past. They need to be more technology-oriented, security-minded and forward-thinking. They need to be able to take advantage of digital tools like software solutions, artificial intelligence and machine learning. In addition, boardrooms need all the skills and experience that make for a broad range of governance and strategic issues.

12 Reasons Why Board Recruitment Practices Need to Change

Here are a dozen reasons why board recruitment practices must change:
  1. The present time requires board directors to have different skills than in the past.
Some of today’s boards are still making the mistake of replacing every outgoing board director with a new director who has the same set of skills and abilities as the retiring director. Most of the time, that doesn’t work because today’s boards have to work at a faster pace than past boards. Boards also face more change and disruption than in past times. Today’s board members need to be forward-thinking and to be aware of the types of new risks and the rate they occur. Boards also need new directors who are capable of dealing with an activist shareholder climate. In recruiting wisely, it’s vital for nominating committees to plan ahead. They must anticipate how director retirements impact board refreshment. When refreshing boards, the new group should be poised to give the company the best chance at success and the skills they bring into the boardroom should prime them to be more competitive.
  1. Boards not using self-evaluations for the maximum potential.
Annual self-evaluations should be done with purpose and intent. They shouldn’t be a rote exercise and they shouldn’t be done solely for the purpose of providing disclosures or appeasing shareholders or regulatory bodies. Board self-evaluations, when done on board and individual levels, will help boards identify a gap analysis, as well as opportunities for improvement. Evaluations will inform board refreshment and current board directors who are misaligned with the corporate strategy.
  1. Current recruitment practices should consider whether new board directors are capable of assessing how external stakeholders view the company and leadership.
Corporations are under more scrutiny than ever before. Investors and others are increasingly evaluating board composition. Diversity, independence, director tenure, director ages, and director skills and qualifications top the list of external concerns. By taking the external view into consideration, boards can anticipate concerns and be proactive about addressing them.
  1. Past practices didn’t require nominating committees and boards to be aligned on the board’s needs.
Nominating committees can no longer make decisions in a vacuum. They need input from their fellow board members on candidate fit. It’s helpful to share a board composition matrix with the board for input and consensus on directors’ needs.
  1. Past practices focused on a narrow set of qualifications.
Past recruitment practices have relied on a narrow set of qualifications for board directors. Today’s boards need a broader set of skills, talents and expertise. Casting a broader net opens up a wider talent-base to choose from and can maximize the effectiveness of the search.
  1. Past recruitment efforts favored a loose structure informed by networking.
The old process for recruitment was more about filling spots with board directors who were acquaintances of other board members or other people who were known in the corporate arena. Because of the complex needs of today’s boards, it’s more appropriate to define steps in the recruitment process and establish a timeline for selection.
  1. Choosing from a small pool of candidates.
Current best approaches for board recruitment practices call for casting a deep, wide net in the initial phase of the search process. Women and minorities may not be as visible as those who are in the current board directors’ purview. Committees that use third parties to help search should instruct them to think outside the box to locate the best talent.
  1. Not allowing enough time to do thorough interviews.
Modern board recruitment strategies should be implemented early and often. Board directors should have ample time to conduct thorough interviews of the final candidate. It also helps for board directors to have opportunities to get to know board candidates in a variety of settings.
  1. Failing to understand and consider boardroom culture.
Boards must know and understand their own culture to know whether candidates will be able to fit in with boardroom dynamics. New directors should be able to be collegial and still exercise a degree of independence. New faces will shape the culture, and that should be positive.
  1. Failing to keep candidates informed of the status of their candidacy.
It’s common for board directors to serve on multiple boards. Boards should be cognizant that board candidates are assessing them in addition to being considered for a board vacancy. Today’s nominating committees should be transparent with candidates about where they are in the process, so candidates don’t miss opportunities with other companies if they’re not chosen.
  1. Failing to do a thorough reference check on all candidates.
Board directors are expected to participate actively in boardroom discussions. They’re also the face of the company. It’s vital to do a thorough background check on candidates, including getting information from people with firsthand knowledge of their character, to protect the company’s reputation.
  1. Failing to have the talk about the modern expectations for tenure.
No longer can board directors expect to serve indefinitely on any board. New directors should be informed that their performance will be reviewed annually in light of the company’s strategic needs as part of regular succession planning. It’s best to have an up-front conversation that board seats won’t automatically be renewed.

Planning For the Future

The pace of today’s marketplace demands that board recruitment practices change to keep up with the times. Nom Gov by Diligent Corporation and the National Association of Corporate Directors (NACD) is a digital solution that helps boards take a modern approach to board and executive recruitment by providing an online search mechanism for board director and executive profiles. It’s the most efficient way to compose modern boards.